The average mortgage rate charged on loans used to purchase a property has dropped sharply, by 0.6 per cent in the past six weeks. "On an average mortgage loan, this could save you 18,000 euros over the entire run of the mortgage," says John Romain of Immotheker Finotheker.
"The average mortgage taken out in Belgium to purchase a property stands at around 200,000 euros. You pay it off over 25 years. The drop of 0.6 per cent will see you pay an interest rate of 3.31% instead of 3.88%. That means that at the end of the day you can save 18,000 euros. You'll feel that in your wallet!" says John Romain of Immotheker Finotheker, an organisation that advises on loans.
"This is definitely the time to buy because there is no mass demand for property right now. It's a buyers' market," Romain told VRT. "Energy and food prices are once again more balanced and now you can see buyers coming back into the market."
Unexpected
Such a sharp fall over a short period of six weeks has surprised Romain: "If you look at inflation, which takes into account energy prices, then we are still seeing a hefty inflation rate of 5.47 per cent in December. In that sense, it is unexpected," he says.
The reason behind the sharp fall in interest rates has to do with anticipatory markets, says Romain. "The US central bank has created the expectation that there are three interest rate cuts coming next year. Everyone now assumes falling interest rates. That has set the markets ablaze."
Balance
In the coming period, rates will not fluctuate much more, says Romain. "You can see that people first want to get inflation under control. With buyers in charge, we are on our way to balance," he believes.
But what interest rates will look like in two years’ time is another story. "Forecasts for 2025 and 2026 suggest that we could move to zero interest rates due to the ageing of the population and moderate economic activity. The US elections are also a factor in fluctuations in interest rates."
But people should not count on even sharper mortage rate falls in coming months, says Romain. In 2020 one could take out a home loan with an interest rate of 1.5 per cent. "Some decline is still possible, but it won't be much. After all, we are stuck with economic growth of 1.3 per cent. Moreover, inflation is expected to rise again in coming months," Romain notes.